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    CNDT
    Earnings call· Jun 2026(Q2 FY26)

    CONDUENT Q2 FY26 earnings call CNDT

    Aug 10, 2026 Source

    Executive summary

    Conduent Q2 FY26 — Strategic Divestitures and Pipeline Growth Drive Transformation

    Conduent is undergoing a significant transformation, marked by strategic divestitures that exceeded financial commitments and a growing pipeline of new business opportunities. While current financial performance reflects ongoing portfolio adjustments and contract roll-offs, the company is making steady progress on cost reduction, financial discipline, and AI integration to drive long-term profitable growth. Management is focused on increasing service density with existing clients and expanding geographically.

    Highlights

    5

    • Divestiture proceeds of $234M exceeded the $200M commitment, plus a 7% equity stake in Quarterhill.

    • Adjusted free cash flow improved by $81M in H1 FY26 compared to the same period last year.

    • Qualified ACV pipeline grew 11% year-over-year to $3B, with the Commercial segment pipeline up 48% since the beginning of 2026.

    • Signed $100M in new commercial business and $89M in new government business in the first two quarters of FY26.

    • The $100M annualized cost savings program is on track to implement the majority of savings this year.

    Concerns

    5

    • Revenue for the quarter was $531M, down 11.9% compared to Q2 FY25.

    • Adjusted EBITDA decreased to $16M in Q2 FY26 from $23M in Q2 FY25.

    • Adjusted EBITDA margin declined 80 basis points year-over-year to 3%.

    • Commercial segment revenue was down 13% due to contract losses and volume declines, including the largest commercial client's contract ending in Q3.

    • Government segment revenue decreased due to lost business and the timing of implementation activities for the Medicaid platform.

    Guidance & targets

    8
    CategoryTargetConfidence
    Full-year 2026 Revenue
    $2.15B to $2.25B
    high materiality
    High
    Full-year 2026 Adjusted EBITDA
    $140M to $170M
    high materiality
    High
    Full-year 2026 Adjusted EBITDA Margin
    7%
    high materiality
    High
    Annualized Cost Savings Program Implementation
    Majority implemented
    medium materiality
    High
    Divestiture Closings (Transit and Tolling)
    Closed
    high materiality
    High
    Trailing 4-Quarter ACV
    Sequential increase
    medium materiality
    Medium
    New Business ACV Finish
    Stronger finish to 2026 than in 2025
    medium materiality
    Medium
    Adjusted Net Leverage Ratio
    One-time levered range
    high materiality
    Medium

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Commercial
    Revenue decline driven by contract losses and volume declines, predominantly in customer experience management, including the largest commercial client whose contract ends in Q3. Adjusted EBITDA margin improved by 20 bps YoY due to cost efficiency programs, despite negative discrete items.
    		$316M-13%—7.6%
    Government
    Revenue decreased from $238M in Q2 FY25 due to lost business and timing of implementation activity for the state-of-the-art Medicaid platform. Adjusted EBITDA margin decreased by 150 bps YoY, impacted by revenue and favorable reserve releases in the prior year. New Mexico implementation completed, Virginia contract ramping up.
    		$215M——23.7%

    Operational metrics

    25
    Adjusted EBITDA
    $16Mdown from $23M in Q2 FY25
    Q2 FY26

    Includes approximately $4M in stranded costs related to the former Transportation segment.

    Adjusted EBITDA Margin
    3%down 80 bps YoY
    Q2 FY26

    Includes approximately $4M in stranded costs related to the former Transportation segment.

    Stranded Costs (Transportation Segment)
    $4Mvs $6M in Q2 FY25
    Q2 FY26

    Costs related to the former Transportation segment, to be addressed once transactions close.

    Cash on Balance Sheet
    $240M
    Q2 FY26

    As of the end of Q2 FY26.

    Adjusted Net Leverage Ratio
    2.1x
    Q2 FY26

    Excludes EBITDA from discontinued operations but includes expected cash proceeds from divestitures at closing.

    Capital Expenditure as % of Revenue
    2.6%
    Q2 FY26

    In line with expectations.

    Off-Balance Sheet Financial Instruments Reduction
    80%
    Q2 FY26

    Reduction in surety bonds and letters of credit, predominantly supporting the government segment.

    Transportation Segment 2025 Revenue
    $609M
    FY25

    Revenue for the divested Transportation segment in 2025.

    Transportation Segment 2025 EBITDA
    $18M
    FY25

    EBITDA for the divested Transportation segment in 2025.

    Transportation Segment Adjusted EBITDA Multiple
    mid-teens
    Q2 FY26

    Multiple at which the Transportation segment transacted, significantly higher than Conduent's current trading multiple.

    New Business ACV (Q2 FY26)
    $99Mvs $111M in Q2 2025
    Q2 FY26

    Sequential improvement versus Q1 2026.

    New Business ACV (H1 FY26)
    $188Mequal to H1 2025
    H1 FY26

    Total for the first six months of the year.

    Annual Recurring Revenue Signings Growth
    12%more than prior year
    H1 FY26

    Compared to the prior year's first six months.

    Nonrecurring Revenue Signings Growth
    7%more than prior year
    H1 FY26

    Compared to the prior year's first six months.

    Qualified ACV Pipeline
    $3Bup 11% YoY
    Q2 FY26

    Across commercial and government segments.

    Commercial Segment Pipeline Growth
    48%since beginning of 2026
    Q2 FY26

    Growth in the Commercial segment's qualified ACV pipeline.

    Renewal Activity TCV
    $617M
    Q2 FY26

    Includes several large healthcare clients in both government and commercial segments.

    Commercial New Business Sold
    $100M
    H1 FY26

    New business sold in the first two quarters.

    Government New Business Sold
    $89M
    H1 FY26

    New business sold in the first two quarters.

    Market Size for Go-Forward Portfolio
    $200B
    Annual

    Large and growing market addressed by Conduent's go-forward portfolio.

    Conni (AI assistant) Inquiry Resolution Rate
    86%
    Q2 FY26

    Percentage of employee inquiries resolved without human intervention by Conni, embedded in the life at work health and wellness platform.

    Conni (AI assistant) Live Agent Interaction Reduction
    20%
    Q2 FY26

    Reduction in live agent interactions due to Conni.

    Employee Count
    droppedmore rapidly as time is going
    Q2 FY26

    Refers to the number of employees in the company.

    Cost Savings Program Breakdown (Headcount)
    60-70%
    FY26

    Portion of the $100M annualized cost savings program attributed to headcount.

    Cost Savings Program Breakdown (Tech Stack)
    30-40%
    FY26

    Portion of the $100M annualized cost savings program attributed to relooking at the tech stack.

    Industry KPIs

    1
    MetricValueDetails
    New business bookings growth$99MUSD

    Product announcements

    4
    ProductTypeDetails
    Conniupdate
    Personalized Agentic AI-Powered Navigatorlaunch
    Verisitelaunch
    Microsoft Copilot and AI-assisted software development toolslaunch

    Deals & partnerships

    7
    MidaxoSale of Transit business

    One of two transactions completing the exit from the transportation business.

    QuarterhillSale of Tolling business

    One of two transactions completing the exit from the transportation business.

    SecurianNew pension risk transfer administration engagement

    Expands Conduent's position in the growing retirement administration market with a differentiated end-to-end solution.

    Trillium Health ResourcesSelection of Health Services Plus platform

    To support claims processing, provider data management, and member services, validating investments in Conduent's healthcare platform.

    Avis Budget GroupExpanded relationship through a new vehicle citation offering

    Leverages multiple solutions from across Conduent's businesses and establishes a new scalable offering for organizations managing large vehicle fleets.

    State of New MexicoImplementation of modernized state-of-the-art Medicaid platform

    Replaced a 24-year old legacy system, enabling faster, more efficient claims processing and improved access to care for approximately 900,000 Medicaid members. Finalized early in Q2.

    VirginiaMultiyear renewal to operate and modernize Medicaid systemsmultiyear

    Enables the transition to a more integrated platform designed to improve access to information, strengthen fraud prevention, and enhance program performance for approximately 1.6 million enrolled Virginians. Implementation is ramping up.

    Capital programs

    1
    Annualized Cost Savings Programon track$100M annualized
    Period spend: majority of this program this year
    Start: Q1 FY26

    Benefit: Optimizing technology spend, rightsizing certain roles, reducing duplication, eliminating bureaucracy and simplifying our operating model

    The program spans all businesses and corporate functions. 60-70% of savings from headcount, 30-40% from tech stack.

    Risks & headwinds

    4
    Contract losses and volume declines in Commercial segmentQ2 FY26, continuing into Q3 FY26

    Commercial segment revenue down 13% YoY

    Mitigation: Focus on increasing service density with existing clients and expanding into adjacent markets; pipeline growth.

    Timing of implementation activity in Government segmentQ2 FY26

    Government segment revenue down from $238M in Q2 FY25

    Mitigation: New Mexico implementation completed, Virginia contract implementation ramping up to drive new revenue in H2 FY26.

    Stranded costs from former Transportation segmentQ2 FY26

    $4M in Q2 FY26

    Mitigation: Will be addressed once the divestiture transactions have closed.

    Natural timing difference between winning new business and revenue impactOngoing

    Some contracts continue to roll off and volume declines in existing client programs

    Mitigation: Focus on improving quality of portfolio and winning business with stronger competitive differentiation and long-term growth potential.

    What to watch in Q3 FY26

    5

    Annualized Cost Savings Program Implementation

    next quarter
    Current$100M annualized, majority on track for this year
    TargetMajority implemented

    Why it matters

    Critical for margin expansion and financial discipline, contributing to the overall transformation.

    We continue to make good progress against the approximately $100 million annualized cost savings program we announced in the first quarter and remain on track to implement the majority of this program this year.

    Q&A highlights

    8

    Inquired about the structural nature of Government segment margin improvements and whether the previous goal of 10% overall adjusted EBITDA margins is still applicable given portfolio changes.

    Harsha reaffirmed the goal of achieving mid-to-higher double-digit margins in individual segments, leading to an overall adjusted EBITDA margin greater than 10%. He attributed Government segment improvements to rapid AI implementation (e.g., fraud detection with Verisite) and leadership changes under Anna Server.

    “We need to be in the mid- to higher double-digit margins. Then we minus the SG&A, that's the central SG&A, bringing us to a greater than 10% margin. So that goal remains unchanged.”

    asked by Michael Kupinski · answered by Harsha Agadi

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Priorities and Transformation Progress

    CEO Harsha Agadi outlined five key priorities: increasing speed and accountability, enforcing financial discipline, reducing cost structure, optimizing the portfolio, and converting pipeline into growth. The company is simplifying its structure, strengthening accountability, and has refreshed its senior leadership team, with approximately 80% being new or in expanded roles. A phased return-to-office approach is also being implemented to foster collaboration and efficiency.

    02

    Portfolio Optimization and Divestitures

    Conduent announced the sale of its transit business to Midaxo and its tolling business to Quarterhill, completing its exit from the transportation segment. These transactions are expected to generate approximately $234M in gross proceeds, exceeding the initial $200M commitment, plus a 7% equity interest in Quarterhill. The divestitures will significantly reduce off-balance sheet financial obligations by 80% and allow for greater focus on core businesses, with proceeds primarily used for debt reduction.

    03

    Cost Reduction and Efficiency Programs

    The company is making good progress on its $100M annualized cost savings program, with the majority expected to be implemented this year. This program targets optimizing technology spend, rightsizing roles, reducing duplication, and simplifying the operating model across all businesses and corporate functions. Management indicated that 60-70% of these savings will come from headcount reductions and 30-40% from tech stack optimization.

    04

    Pipeline Growth and New Business Wins

    Conduent's qualified new business opportunities pipeline stands at $3B, an 11% increase year-over-year, with the Commercial segment pipeline growing 48% since the beginning of 2026. The company signed $100M in new commercial business and $89M in new government business in the first half of FY26. Notable wins include a pension risk transfer engagement with Securian, a Medicaid platform for New Mexico, and a multiyear renewal for Virginia's Medicaid systems.

    05

    AI Integration and Innovation

    Conduent is embedding AI across its solutions and internal operations. Examples include Conni, an AI-powered digital assistant resolving 86% of employee inquiries and reducing live agent interactions by over 20%. The company's personalized agentic AI-powered navigator was recognized by United Healthcare for its innovation in simplifying healthcare interactions. Internally, Microsoft Copilot and AI-assisted software development tools are being deployed to accelerate development and improve productivity.

    06

    Financial Discipline and Deleveraging Targets

    The company demonstrated improved cash performance, with cash usage essentially flat quarter-over-quarter. The adjusted net leverage ratio is expected to be 2.1x after the divestiture proceeds. Management has a long-term goal to reach a 'one-time📎 levered range' within the next 18 to 24 months, driven by continued cost efficiencies, top-line growth, and reduced capital expenditures.

    AI-generated summary of the company’s earnings call. Not investment advice.